Towards Recoupling? Assessing the Impact of a Chinese Hard Landing on Commodity Exporters: Results from Conditional Forecast in a GVAR Model

Ludovic Gauvin and Cyril Rebillard

MPRA Paper from University Library of Munich, Germany

Abstract: China’s rapid growth over the past decade has been one of the main drivers of the rise in mineral commodity demand and prices. At a time when concerns about the sustainability of China’s growth model are increasingly rising, this paper assesses to what extent a hard landing in China would impact commodity exporters. After reviewing the main arguments pointing to a hard landing scenario – historical rebalancing precedents, overinvestment, unsustainable debt trends, and a growing real estate bubble – we focus on a sample of twenty-five countries, and use a global VAR methodology adapted to conditional forecasting to simulate the impact of a Chinese hard landing. We model metal and oil price separately to account for their different end-use patterns and consumption intensity in China, and we identify two specific transmission channels to commodity exporters: through exports (with both volume and price effects), and through investment (a fall in commodity prices reducing incentives to invest in the mining sector). According to our estimates, Latin American countries would be hardest hit – with a 6 percent cumulated growth loss after five years – followed by Asia (ex. China); advanced economies would be less affected. The "growth gap" between emerging and advanced economies would be considerably reduced, leading to partial recoupling.

Keywords: China; hard landing; spillovers; global VAR; conditional forecast; emerging economies; commodities; recoupling (search for similar items in EconPapers)
JEL-codes: C32 E17 E32 F44 F47 Q02 (search for similar items in EconPapers)
Date: 2013-10
New Economics Papers: this item is included in nep-for, nep-mac and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Working Paper: Towards Recoupling? Assessing the Global Impact of a Chinese Hard Landing through Trade and Commodity Price Channels (2015)
Working Paper: Towards Recoupling? Assessing the Global Impact of a Chinese Hard Landing through Trade and Commodity Price Channels (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:65457

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